Yes, broker producers want an ownership stake

Broker producers looking at making career shifts are examining their options a lot harder today than they did even two or three years ago, says industry veteran Randy Carroll, CEO of Ai Insurance Organization.

Carroll says when he started as a producer, he was glad to have a job working for a solid brokerage. He knew that over the next five to ten years if he built a good book of business and customer relationships, maybe there was an opportunity to have an equity discussion or the possibility of gaining a little bit of ownership in the brokerage.

“That conversation has changed so much,” Carroll says during a recent CU What’s on Dec? podcast. “Producers are now looking at, ‘No, I want to make sure that I’ve got my future baked in here. I want to know that I have that option baked in.’”

He says broker producers don’t want to leave themselves at risk of having a conversation with a principal broker or owner “on a chance or an opportunity that might happen.” They want assurances that if they follow a certain path, or achieve a specific goal, they can work their way to the next step.

Consolidation in the broker channel has driven a lot of this shift in career paths, with producer-to-owner models gaining traction. As an example, one broker producer told Carroll, “I’m 51 years old. I don’t want to do this again. This is my last move; I’ve got to make sure it’s a good one.”

Says Carroll: “He wants to make sure that he has something more than a gold watch and a handshake 10 years from now. He wants to make sure that he has a guarantee built in that as long as he meets the following criteria, that that conversation’s not a conversation, it’s a guarantee.”

Ownership options

Brokers’ ownership of a book of business is another important consideration, and brokers should take a hard look at their exit options and how easy it is to move a book of business to a new brokerage. For example, what happens if a broker has some percentage of ownership baked into their contract, but then one party wants to move on?

“[Say]…there’s nothing in that contract that says the brokerage has to help you move that book,” Carroll says. “So…you’ve found yourself a new home but now faced with, ‘Wow, I’ve got a lot of work to do over the next 12 months because, yes, I own that book, but I’ve got no way of transferring that book to this brokerage because that wasn’t negotiated.’”

This is why it’s important to look at what Carroll calls the ‘divorce clause.’

“I always look at it this way — at the end of the day, if a brokerage owner and a broker producer don’t see eye-to-eye and they want to part, they still want to have coffee,” Carroll says. “They still want to sit down and be able to socialize, they want to be able to go to a broker convention and still stop and have a chat and talk to each other.

“So you’ve got to do everything you possibly can to make sure that it’s fair for both parties. A messy divorce isn’t good.”

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Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.